Tax Time? Paper: 'The Life and Death of the Dutch Groundwater Tax'

Again, I have friend and colleague Michael van der Valk of the Dutch Portal to International Hydrology to thank for this paper, 'The Life and Death of the Dutch Groundwater Tax' by Marianne Schuerhoff, Hans-
Peter Weikard, and David Zetland (shown here). 

Here is what the Dutch site says about the paper:

Marianne Schuerhoff, Hans-Peter Weikard and David Zetland have published their paper "The life and death of the Dutch Groundwater tax" in Water Policy. In the framework of our UNESCO-related groundwater governance meeting in March 2013 we could offer you a pre-release of the paper already. The authors examine the Dutch national groundwater tax — a “win-win-win green tax” that promised to simultaneously provide revenue to government, reduce the relative burden of other taxes on productive behaviour (e.g., income tax), and improve environmental outcomes.

They found that the Dutch national groundwater tax generated revenue without having a noticeable impact on production incentives or environmental health. Although the Dutch national groundwater tax is often cited as an example of environmental economics in action, it was neither designed, implemented nor operated in accordance with environmental goals. In many ways, the Dutch national groundwater tax was just another source of revenue — and one that bothered special interests. The Dutch government revoked the "inefficient" GWT on 31 December 2011. 

Here is the paper's abstract:

We examine the Dutch national groundwater tax (GWT) – a ‘win–win, green’ tax that promised to reduce distortions by simultaneously reducing the income tax burden and improving environmental outcomes. We find no evidence of these impacts. Instead, we see that the GWT increased distortions by taxing a narrow base (a few drinking-water companies reliant on raw groundwater) and interfering with groundwater management programmes funded by an existing provincial groundwater fee. The Dutch government revoked the GWT for being fiscally inefficient and environmentally unhelpful on 31 December 2011, but this story provides some useful lessons.

Looks some real good lessons can be learned here.

Download Dutch_GW_Tax

Enjoy!

"From these lessons, we offer this advice. First, decide whether it is more important to raise money without changing behaviour or to change behaviour without raising money. Second, consider the mar- ginal impact of a tax that interacts with pre-existing institutions. Third, remember that management or regulations may be more efficient than taxes in changing behaviour or outcomes. Fourth, do not tax special interests if you can tax a broader population. Fifth, monitor outcomes if there is an expectation of reaching a (green) policy goal. Finally, do not call a fiscal tax ‘green’." - Marianne Schuerhoff, Hans-Peter Weikard, and David Zetland., p. 1075 

Comments

[Account Deleted]

@Terence-- read the paper, which is about wholesale water. Drinking companies source raw water from ground and surface. Customers pay fixed and variable charge that depend in that mix of sources as well as the water companies' infrastructure costs...

[Terence Lee]

How is drinking water paid for in Holland? Is there a price per cubic metre or is there a standard charge per connection? It would seem more sensible to increase or put in place a cubic metre price for drinking water to be paid by all consumers not the companies providing the service.